You may have recently encountered the term “Tokenized Real Estate” only to ask yourself: “What in the world is that?” Fear not, you’re truly not alone. The process known as “tokenization” has been gaining popularity, but mainly in the higher branches of investing – and understanding it from a layman’s point of view is difficult given the complex explanations out there. But investing shouldn’t be that complicated or reserved only to those who have studied it intensively. Investing should be for everyone. At CROWDLITOKEN, we want to help you get there
Let’s start with what we know: Direct Investment
I n the world of real estate, there used to be two different ways of investing: One, which we call direct investment, is the act of purchasing property by yourself or with a few friends. But this has long been a flawed concept, as it only allows for the wealthier to have the actual investment capacity – you need to pay the whole property at once or put it on credit. Beyond that, direct investment also means that you have to be directly implicated in all of the aspects of the property. Should there be issues with the property, they’re entirely yours to sort out to ensure the value grows. And should you have problems with your partner investors, it can quickly become an uncomfortable situation. Strong points:
- The money your property generates is all yours.
- You get to make all the decisions yourself.
- It costs a lot of money.
- It takes up a lot of time.
- You need to use part of the income to do maintenance.
- You’re entirely responsible for every problem.
Now, given that not many of us can afford to dish out the huge amount of money it takes to purchase a property, an alternative was created.
Indirect investment, how is it different?
Then there are indirect investments. While they seem to offer a more reliable concept, they remain flawed in multiple aspects. Why? Well, simply because such an investment isn’t made in growth-oriented property. It’s made towards an investment trust or real estate fund. own. Here’s how it works:
- It starts with a company, the “Real Estate Trust or Fund.” They own multiple properties and are always seeking to buy more in order to increase their value.
- In order to purchase these additional properties, they need investors, people like ourselves. Investing in this company will allow you to get some passive income. The company decides on how much you get in return for your investment.
- With the money from investments, the company purchases more properties and becomes more valuable.
As you can see, the company has the ultimate decision in how much you’ll generate from your investment. There are many reasons for that, but it’s primarily because they take care of the maintenance and all the other aspects of the properties. You just get the returns. But the important part to consider: Getting a high number of investors allows this company to purchase more income properties, growing their own value. The fact that the company is gaining in value has no impact on your returns. When you participate in indirect investing, you’re investing in companies, not properties. Yes, those companies’ objective is aimed at financial growth, but not yours – it’s their own. These means of real estate investing have been around for a long time. But, given their high premiums, they rarely ever meet consumer demand where it stands. Many are simply unrealistic for the average consumer to invest in. That’s why we decided to change that at CROWDLITOKEN. Now that you’re clear on what has already been around for a while, let’s explore what it means to “tokenize” some real estate and how the CRT is changing the world of investing
Where Tokenization Comes In
Simply put, cryptocurrencies like Ethereum and Bitcoin bid on market popularity in order to define their values. The more people that are buying into it, the more valuable it becomes. Security tokens, on the other hand, don’t rely on speculation. They rely on real-world value and are directly related to tangible assets, like real estate. CROWDLITOKEN’s digital token, known as CRT, bridges the divide between direct and indirect investing in real estate. You get to choose what property to invest in (direct) through a decentralized token (indirect) emitted by the company. It’s simple, really:
- CROWDLITOKEN AG begins by shopping for valuable and growth-oriented properties. This shopping entails uncovering all the possible details, from hidden vices to growth-sensitive factors. Once a suitable property has been found, the company buys it.
- After purchasing the property, token holders can allocate their CRTs to this property. The CRTs correspond to a freely selectable fraction of the value of the property.
- As the years go by, the specific property generates rental income, which is distributed to the investors. The investors can choose to sell or reinvest those earnings.
Now you may argue that this is basically what real estate funds and trusts do, minus the token; and that would be mostly correct. But they would still require premiums in the multiple thousands of dollars, which isn’t representative of today’s market – CRT only costs 100CHF or the Euro equivalent. Plus, CROWDLITOKEN will never inundate you with high fees.
The path to a newfound investing future
Once a token is purchased, you’re free to do what you wish with it. You can choose to put it in a property in an area you may have inside knowledge of, or freely transfer your tokens from one property to another. With the use of smart contracts, you can always rest assured that your tokens will transfer seamlessly between properties, and even other token holders — all through a user-friendly dashboard. Learn more about how our security token will help solidify your investing future and start investing now.